The Economics of CX Journey: Why CX can be Worth Millions?

Effective CX Strategy

One of the biggest obstacles for businesses aiming toward customer centricity is getting tangible proof that their investment will yield returns. While sales can be tied to revenue growth and marketing campaigns to the number of leads converted, how can one identify the ROI in CX?

A 2022 Forrester report has put a $ value on transforming CX. Their analysis highlighted that the largest companies in some industries (airlines, luxury auto manufacturers, mass-market auto manufacturers, auto/home insurers, multichannel banks, direct banks, credit card issuers, health insurers, midscale hotels, upscale hotels, investment firms, and retailers) could earn up to hundreds of millions of dollars in incremental value for every 1-point improvement in CX.

Unfortunately, for most organizations, investments in CX don’t generate enough value or offer an acceptable ROI. This is largely because of a faulty CX strategy that fails to meet customer expectations and focuses more on acquiring new customers rather than keeping the existing ones satisfied. Interestingly, failing to meet customer demands has been shown to have twice the negative impact compared to the positive impact that flows because of delighting customers.

❝A KPMG report on CX depicted clearly that an organization’s economic value is lost when experience fails to meet customer expectations, almost a 2x loss in revenue.❞

By linking CX investments to specific customer activity measures such as churn rate, repurchase rates, or customer lifetime values, it can be translated into a positive financial impact. When investments are designed to meet customer expectations or meet competitive benchmarks, the impact is often seen in measures related to loyalty, such as the intent to recommend products to others and repurchase patterns. This helps in customer retention and also in onboarding new customers without spending large sums.

As data is often dispersed across businesses, held in an inconsistent manner, and housed in disparate databases lacking integration, the time and investment associated with identifying and gathering CX data can come across as a costly affair. Firms can cut costs by investing in sustainable methods and implementing tools and processes to support the monitoring and management of CX costs.

The Correlation between CX and Revenue Growth

CX is designed to be an engine of growth. There is a huge potential to translate a rich set of CX measures into specific investments that can drive revenue. By closing the gaps between CX measures and growth, investors can correlate quality and loyalty with revenue drivers.

Forrester has tried to establish a direct relationship between the two by calculating the CX index. It has connected the dots between CX quality, customer loyalty, and revenue models.

CX index scoreAnnual incremental revenue per customer ❎ Avg customers per company = Annual impact per company 

By calculating the CX index score for various industries, it has given tangible credence to the assumption that better customer experience = higher revenue growth.

Here is a summary of the CX index:

Industry  Annual incremental revenue per customer  Avg customers per company  Annual impact per company 
Luxury automobile $337.10 350,000 $118 mn 
Retail banks  $3.92 15 million  $59 mn 
Insurance firms  $3.25 15 million  $49 mn 
Hotels  $6.52  10 million  $65 mn 
Credit cards  $0.25  61 million  $15 mn 

Read more- Learn how to fast-track your CX success with the right strategy

Effective CX Strategies to Drive Revenue Growth

Providing a superior customer experience is crucial for any industry to stand out from the competition. A blend of agile technologies and viable strategies can go a long way in ensuring an optimal CX delivery that has a direct bearing on revenues. Let’s explore some of these:

‣ Close the Personalization Gap

Are your conversion rates not so good? Do your prospects never come back? It’s likely that you lack an effective personalization strategy!

All day, across channels, users are being served experiences. Personalization automatically delivers the most relevant experiences to customers. It ensures an engagement where you not only give your customers what they REALLY want but also convey the message that customers’ opinion and experience matters. However, missing out on personalization can be a missed monetary opportunity.

❝ According to a McKinsey report, companies that grow faster drive 40 percent more of their revenue from personalization than their slow-growing counterparts.❞

Personalization is not only about ‘putting your customers first’; it can be an effective method to assist customers in making the right purchases and boosting your sales. By keeping a tab on the current CX trends and tweaking your services to meet customer expectations, you can convert leads. Curated product recommendations and smart offers depending on previous purchases can be the way to your customer’s heart, ultimately pushing sales up.

‣ Offer Consistent Omnichannel Support

By offering consistent support to your customers across multiple channels, an omnichannel strategy helps customers with – convenience and experience – two things they seek from your brand. An omnichannel experience can help decode customer preferences and browsing behavior which can contribute to creating a meaningful and personalized experience for customers.

❝A study by Interacting Advertising Bureau (IAB) showed that consistent messaging across multiple channels could increase the purchase intent of consumers by 90%.❞

Customer loyalty, brand recall, and repurchases are all increased by an effective omnichannel experience. By helping drive more sales and traffic to their businesses, companies with a strong omnichannel strategy can witness a 9.5% increase in revenue, as per the Aberdeen group.

Further, stitching the information from all communication channels equips the agents with all the right information at the right time. This can help them to resolve queries faster and ultimately boost productivity.

‣ Invest in API-ready Infrastructure

To keep pace with the evolving competition in the CX domain, businesses ought to offer innovative services to customers at the same rate as their competitors do. Powerful APIs can help unlock business potential, especially in the banking sector, by helping firms link legacy infrastructure with innovative propositions.

❝ Research on ‘APIs: The digital glue of the modern bank’ by Accenture in 2019 indicates, “Banks that embrace the new API-driven open banking initiatives can expect a potential revenue uplift of 20%, while those falling behind are at risk of losing 30% of revenues to disruptive industry players. ❞

Companies relying on API reap huge revenue benefits; for example, Salesforce and Facebook have made API technology a big part of how they do business. API integrations can also offer certain upsell opportunities, helping to boost revenues. A strong API-driven architecture at the core helps businesses to launch new products faster and also easily modify their offerings to suit customer demands. This helps create a vibrant ecosystem that not only helps customers with choice and convenience but also personalizes their experiences.

‣ Identify Cross-sell and Up-sell Opportunities with AI

A truly effective cross-selling and upselling requires a sales rep to have an in-depth understanding of your customer and what’s important to them. It isn’t as simple as selling the next best version of your product or services. Thus, taking out time to really understand customer demands can improve the likelihood of a successful upsell, helping balance both CX and revenue. But agents do not have that sort of bandwidth, and thus arises the need for good technological innovation.

A case in point is the Agent Accelerator which maps customer journeys end-to-end because no agent can remember every customer they’ve talked to. It offers seamless access to each customer’s contact journey, along with viable cross-sell and upsell alternatives displayed on the unified screen.

❝A Forbes Marketing metric study pointed out that the probability of selling to an existing customer is 60-70%. The probability of selling to a new prospect is 5-20%. Upselling to existing customers is a highly cost-efficient way to boost lifetime value.❞

Identifying such opportunities help increase the average order value, creating revenue and profit at low incremental costs.

Wrap up

In today’s competitive world, customer experience is not just a fun metric for your business to measure. It can reap results in revenue and help retain customers for the long haul. Adopting innovative tools can help reduce the friction in CX and empower agents to drive customer satisfaction, thus making your customer say, “I’ll be back!”

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